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Visa Enhances Settlement Options with USDC, but Tax Implications Loom Large

This morning, Visa announced a new initiative allowing U.S. card issuers to settle transactions directly in Circle’s USD Coin (USDC).

While the move promises modernized liquidity and weekend settlement benefits, it also brings significant tax obligations for banks and fintech companies.

Issuers receiving USDC must maintain detailed transaction records for the IRS, tracking the cost basis of each sale.

The first banks to adopt this system are Cross River Bank and Lead Bank, with broader rollout planned for 2026.

With every stablecoin transaction categorized as a taxable event, companies will face the challenge of navigating complex tax regulations.

The IRS classifies stablecoins, like USDC, as digital assets, meaning they are subject to reporting requirements regardless of their nominal value.

Historical price fluctuations of stablecoins further complicate tax implications, as gains must be reported even if they hover around the $1 peg.

Visa and Circle are likely to provide support for adoption, given the financial strength of both firms and their incentive to drive usage of this new settlement method.

However, whether the benefits outweigh the tax burdens remains uncertain, and adoption metrics will be critical in assessing the long-term impact of this initiative.

The crypto community and financial institutions must stay informed, as the implications of USDC settlements can deeply influence operational strategies going forward.